Employee retention is a major factor for success in any company. When a staff member leaves, the time and resources spent finding, training, and allowing a new hire to adjust to the workload of their predecessor makes for an expensive process. It’s almost always better to keep your team members.
Some employee turnover, however, is inevitable. It can even be healthy. Rather than lament the loss of your staff members, it’s better for your company to assess whether your turnover rate is a cause for concern or is simply the cost of doing business in a changing world. This guide is here to help.
Calculating your turnover rate
Before you can assess the health of your company’s turnover rate, it’s important to define what counts as turnover. Generally, your employee turnover rate consists of the percentage of employees who leave the company within a specific time period, usually monthly or yearly.
You should consider all types of turnover in your calculation, whether departures are due to dismissal, retirement, or resignations. While not all reasons for departure are equal from a company health standpoint, all are natural parts of a business life cycle. However, it isn’t useful to include employee transfers like promotions or demotions. If you wish, you can calculate separate rates for voluntary and involuntary turnover.
How to calculate your turnover rate
Calculating your yearly turnover rate requires two figures:
- Amount of employees at the start of a yearly period (S)
- Amount of employees who departed during that period (D)
Remember to count new hires who began work and quit within the year in your D category, but don’t count new hires who are still working at your company as part of your S category. Once you have your figures, use this equation:
Annual turnover rate % = 100(D/S)
So, if your company starts the year with 238 employees, and 22 of those employees leave within that year, the annual turnover rate is 100(22/238)=9.24%
What is a healthy turnover rate for a company?
Unfortunately, there is no simple answer as to what makes for a healthy turnover rate. Every industry is different. The overall average turnover rate in 2021 was 47.2%, with the leisure and hospitality industry topping the charts at 84.9% and the financial industry sitting around 28.5% on the opposite end.
It’s worth noting that 2021 was in the heart of the great resignation, so these numbers are somewhat skewed, but the effects of that process are still in motion, so you should factor them into your target turnover rate.
A rule of thumb followed by many businesses is that you should shoot for a target turnover rate of about 10%. Obviously, the average is much higher than this. While 10% is a good starting point, it’s more useful to take a look at statistics within your own industry. However, it’s also worth considering your business as an independent entity. Has your turnover rate been increasing or decreasing? What reasons do employees have for leaving? The rate itself might be less useful than its context.
Top reasons for employee turnover
To best understand if your turnover rate is healthy, it’s more useful to examine the reasons people are leaving than the number of people leaving. If you can fix problems within your company, your turnover rate will become healthier as a side effect. Pew Research conducted a 2021 study that outlined the top three reasons people quit their jobs over a one-year period. If you feel that these reasons don’t apply to your company, you might have a healthy turnover rate.
- Low pay
This reason might be the most obvious. If your employee finds a better-paying opportunity with another company, they might leave even if they’re generally satisfied with your company and their position.
Wage increases for people who have switched jobs generally outpace those who have stayed at one company for ten years. The reasons for this phenomenon are complex, but they can be attributed to a sort of business inertia. Sometimes, management at companies see no need to fix a system that doesn’t appear broken until it’s too late. More workers are finding that new hire salary budgets outweigh current company raise budgets.
We get it: raises are difficult. In larger companies, authorization for a pay increase can be difficult to attain, and staffing costs are one of the biggest expenses a company faces. However, it’s worth noting that due to the high costs associated with hiring a new employee, offering a pay increase can actually save your company money in the long run.
- Lack of advancement opportunities
Nobody wants to work a dead end job. You want ambitious employees, but it’s important to remember everyone has their own career goals. If someone sees no room for advancement at your company, they’ll find somewhere that more closely aligns with their goals.
How often do you offer promotions at your company? Do you typically offer new positions to outside hires before internal staff members? Do you offer educational advancement opportunities that help current employees develop their career-related skills? Investing in your current employees is often a win-win situation.
- Feeling disrespected at work
People want to feel recognized and respected at work, especially when they succeed. A lack of recognition is a sure path to employee disengagement and burnout.
Respect is more than just positive recognition, though. It’s about the entire work situation being offered. You can show respect through pay increases, better benefits, and a more flexible work schedule. The best way to offer respect to your employees is to ask them what you can do to improve their work-life balance and support them.
When is turnover a good thing?
Let’s say your employees are happy with their pay, advancement opportunities, and respect given in the workplace. Your company seems to be working in harmony. There’s just one problem: people are still leaving. What can you do to fight this? Well, maybe you shouldn’t. Some turnover is not only inevitable, but healthy too.
Some turnover might indicate that your company isn’t remaining stagnant. If the majority of your employees are pleased by working conditions, the few that still leave might have simply been bad fits. Both you and departing employees might be better off parting ways. New people can mean new, innovative ideas, and those who haven’t been long ingrained in your company will be able to see things longtime staff can’t.
Turnover can also expose cracks in your company structure. A departing employee throws a wrench into the system, and understanding how their leaving affects day to day work can help you understand the important aspects of their former position better, especially if the position evolved since their hiring. These insights can mean a smoother, more well-informed onboarding process for their new counterpart. You can also make adjustments to company structure as needed.
Let Corporate Chaplains of America support your team
Whether you want to decrease your turnover rate, boost your benefits, make your employees happier, or all of the above, chaplaincy is an excellent addition to your benefits package.
Corporate Chaplains of America offers in-person and 24/7 virtual support to you and your team members, so everyone can get the care they need when they need it most. Contact CCA today to learn more about what we can do for your company.